As Monterrey bloomed, smugglers working border cities such as Matamoros, Reynosa and Nuevo Laredo sent their families to live here, where the reputation was far different from the lawlessness that ruled closer to the border.

But in early 2010, fissures between the Gulf Cartel and its enforcers, a band known as Los Zetas, led by former army commandos, broke into open warfare across northeast Mexico. For the past 18 months, the Zetas have inched into Monterrey, setting up roadblocks, extorting businesses and shooting at rivals on city streets.

Homicides in the surrounding state of Nuevo Leon have soared from 267 in 2009 and 828 in 2010 to 1,268 through Sept. 5 this year. The spike has drawn comparisons with Ciudad Juarez, a much smaller border city that is considered the most murderous place in the Americas, with around 1,471 murders so far this year.

The violence has forced Monterrey residents to make big changes in their lifestyles. Largely gone are rural outings along highways, where criminals now routinely set up roadblocks. The highway to Reynosa, across the border from McAllen, Texas, has seen traffic drop by 44 percent.

"I was invited to go water skiing last weekend at Presa de la Boca," said Tatiana Clouthier, a prominent civic activist, referring to a once-popular artificial mountain lake 20 miles from the city. She balked.

"My kids said, 'Are you sure nothing will happen to us along the road?'" she recalled. They declined the invitation.

Miriam Castillo, mother of 9-year-old Juanito, said elementary school teachers train students to dive under their desks at the sound of gunfire. It happened recently at his school. Asked what he did, Juanito looked at his feet and said, "Hit the floor."

Castillo and her children spoke outside the ruins of Casino Royale, a gambling hall that assailants doused with gasoline and set afire Aug. 25 in an extortion attempt. Most of the 52 victims were women, one of whom was pregnant.

Casino Royale is set amid BMW and Mercedes dealerships in a posh area of Monterrey. Some of the victims came from families of the city's upper crust.

The cold-blooded massacre stunned Mexico, and President Felipe Calderon called it "an aberrant act of terror." But events afterward only underscored how deeply the Zetas have penetrated the police and the political establishment.

A state police officer was arrested after prosecutors accused him of serving as a lookout for the Zetas assailants. And three videos emerged of the brother of Monterrey Mayor Fernando Larrazabal collecting wads of cash inside other casinos prior to the firebombing. The brother was arrested, and his lawyer's explanation that he was collecting debts for cheese he had sold the casinos is now a punch line.

Few laugh, however, at rampant extortion — from neighborhood shops to big factories and warehouses. Security costs have skyrocketed.

"Come over here," said the manager of a large auto parts distributorship, looking out a window toward a parking lot. "See the laser? If someone comes in, the alarm goes off."

Extortion threats have forced the company to close six retail outlets in Monterrey. Year-on-year business fell 18 percent in August, he said, speaking on condition of anonymity for fear of reprisal.

Another businessman, who fled Monterrey with his wife and children to the Houston area, recounted how he'd opened an upscale bar with his brother. One day, a group of Zetas arrived, and their leader introduced a man he said would work at the bar.